Gold steady near 2-mth highs as N. Korea tensions continue

Dan Gutierrez

FED WATCH: As well as monitoring the geopolitical backdrop, investors are looking ahead to an appearance Thursday by Bill Dudley, president of the U.S. Federal Reserve Bank of NY, for signs of the Fed's outlook on the economy.

The hope that the Fed will have to slow its rate-hike path appeared to stop, at least for now, the near $1-trillion loss in world stocks valuations this week triggered by the war of words between Pyongyang and Washington.

The index ended up 4.93 points at 16.04, the highest level since November 8, when Trump was elected president.

Trump continued to ramp up the rhetoric with a post on Twitter this morning indicating that the U.S. is prepared to take military action against North Korea.

Global markets have been on edge since Tuesday, when President Donald Trump warned North Korea of severe retribution should the authoritarian state proceed with any more missile tests or threats. The figure showed a decline of 1.1% versus expectations for a 0.5% drop and reversing from a 1.9% gain in May.

"The war of words between the leaders of the USA and North Korea continues to dominate investor sentiment", said Forex.com technical analyst Fawad Razaqzada.

The Dow Jones Industrial Average rose 43 points, or 0.2%, to 21,885, led by Apple Inc.

MSCI's broadest index of Asia-Pacific shares outside Japan skidded 1.2 percent in its third session of declines, heading for a 2.1 percent drop for the week. The Shanghai Composite Index lost 0.2 percent to 3,275.57 and Hong Kong's Hang Seng was off 0.3 percent at 27,757.09.

He said the crisis provided a "perfect trigger" for a correction at a time when many markets - including the FTSE 100 - were at or around record highs, leaving them vulnerable to a sell-off if investors think it is time to take profits. BNY Mellon FX strategist Neil Mellor told Reuters that in recent years, "the market hasn't really reacted to things on the Korean Peninsula" because in the past "it [has been] largely North Korean sabre-rattling".

Investors again sought safe-haven assets such as gold and the Swiss franc, helping gold hit a more two-month high. The dollar index was up 0.15% to 93.68 as both the euro and sterling weakened against the greenback.

The dollar weakened after news that US producer prices unexpectedly fell in July, recording their biggest drop in almost a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.

The dollar index .dxy fell 0.39 percent, with the euro up 0.48 percent to $1.1827. Basically if the streak of trading days without a 1%+ up or down day is going to be broken, it's better for it to break with a 1%+ down day than a 1%+ up day.

South Korea's KOSPI fell 1.7 percent to its lowest since May 24, but its losses for the week are a relatively modest 3.2 percent. "There are four more (inflation) prints between now and the December FOMC meeting and we expect the Fed to remain data-dependent, if a touch more cautious", TD Securities said in a note. The yeild on the benchmark 10-year Treasury yields fell as low as 2.197 percent overnight, their lowest level since June 28.

The 30-year bond US30YT=RR last rose 28/32 in price to yield 2.7759 percent, from 2.818 percent late on Wednesday.

After touching a more than two-month high at US$1,291.86, spot gold last added 0.2 per cent to US$1,288.81 an ounce.

US crude CLc1 was unchanged at $48.59 per barrel and Brent LCOc1 was last at $51.84, down 1.63 percent on the day.

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